Question

make price and output decisions without regard to what their competitors might do. have no perceptible influence on the market price, but choose output where marginal revenue equals the marginal cost of production. carefully watch and anticipate the moves of their competitors

Answer 1

Answer:

Monopolistic Competition

Explanation:

Features of a Monopolistic Competition includes

1. make price and output decisions without regard to what their competitors might do.

In a monopolistic competition, there are large number of firms but not as large as under perfect competition which means each firm can control its price-output policy to some extent. It is assumed that any price-output policy of a firm will not get reaction from other firms

2. have no perceptible influence on the market price, but choose output where marginal revenue equals the marginal cost of production.

In a monopolistic competition, If a firm reduces its price, the gains in sales will be slightly spread over many of its rivals so that the extent to which each of the rival firms suffers will be very small. Thus these rival firms will have no reason to react.

3. carefully watch and anticipate the moves of their competitors

In a monopolistic competition, some firms will enter when the existing firms are making super-normal profits. With the entry of new firms, the supply would increase which would reduce the price and hence the existing firms will be left only with normal profits. Similarly, if the existing firms are sustaining losses, some of the marginal firms will exit. It will reduce the supply due to which price would rise and the existing firms will be left only with normal profit.